Germany Moves Fast in Nominating New Official at ECB

Germany has nominated its deputy finance minister, Jörg Asmussen, to succeed its former top official at the European Central Bank (ECB) Jürgen Stark, following Mr. Stark’s shock resignation last Friday.

Stark was said to have officially resigned for “personal reasons,” though many experts have cited his staunch opposition to the ECB’s accelerated bond-purchase program as the primary reason for his departure.

Germany has nominated its deputy finance minister, Jörg Asmussen, to succeed its former top official at the European Central Bank (ECB) Jürgen Stark, following Mr. Stark’s shock resignation last Friday.

Stark was said to have officially resigned for “personal reasons,” though many experts have cited his staunch opposition to the ECB’s accelerated bond-purchase program as the primary reason for his departure.

His resignation came on the day that G-7 finance ministers and central bankers had met in Marseilles for private discussions on how to handle the debt crisis as well as protect the banks that held Greek debt in the event that the country was to default. In addition, it also comes roughly seven months after Axel Weber abruptly resigned as head of the Bundesbank and withdrew his candidacy for the top post at the ECB.

In response to Stark’s departure, the Euro sank to its lowest level since 2001 against the yen, while numerous European markets also suffered – with France’s CAC down 3.6 percent, Germany’s DAX down 4 percent and Britain’s FTSE down 2.35 percent.

[quote]“His resignation is a wake-up call, perhaps the last warning,” said Edgar Meister, a former director of the Bundesbank, as quoted by The Globe and Mail. “Politicians cannot misuse the central bank to finance governments, otherwise danger threatens – for the ECB as well as the euro.”[/quote]

Despite his resignation, Stark had agreed to remain in his position until his successor was in place. Asmussen, who has yet to be confirmed, will only able to start work at the ECB toward the end of the year.

Asmussen has been one of the key officials in shaping Germany’s response to the financial crisis since 2008, and has handled many of the detailed negotiations between Berlin and other euro-zone capitals on the region’s bailouts of Greece and other cash-strapped countries.

While Asmussen was a protégé of Axel Weber, and is considered to be a monetary and fiscal conservative as well, he is said to be more pragmatic than Stark and his appointment may reduce the ideological tensions within the bank.

However, the 44-year-old’s views on central banking issues, including the ECB’s controversial policy of buying struggling euro governments’ bonds, are not publicly known. It is therefore unclear whether Asmussen would continue Stark’s policies or show a more-flexible approach.

Carsten Brzeski, a senior economist at ING Bank in Brussels, told MarketWatch that Stark’s controversial exit may also stoke expectations for easier monetary policy.

“With Juergen Stark, the probably most hawkish ECB Executive Board Member will leave the stage,” he said. “Over the medium term, Stark’s exit should not have a big impact on the ECB’s monetary policy. … In the short run, however, [his] exit will give rise to new speculation about rate cuts.”